Canada's fighter jet problem: An imperfect proposal for Peter MacKay

Opposition calls for his resignation aren’t falling completely on deaf ears in the Prime Minister’s Office, but nor does the government’s response to the AG’s report suggest the Conservative cabinet is about to change dramatically — if at all. Instead, the wagons were circled and the F-35 procurement sequestered within Public Works.

In the face of a procurement plan that went horribly awry and budget cuts that went deep into his NDHQ, MacKay needs a plan to restore morale and turn his political fortunes, which have been damaged by revelations of his use of search and rescue helicopters and back-to-back procurement disasters — helicopters last year and now the F-35.

Unfortunately, any damage control comes at a high price, both financial and political.

And beyond the politics, Canada’s military has a problem. It needs to replace its existing fleet of CF-18s. The $9 billion allotted for the F-35 has been frozen, though the unit price continues to rise.

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Lockheed Martin F-35 Lightning II

If Canada were to sign a contract for the F-35 fighter jet in 2013, it would likely pay more than $100 million for the first few planes it would receive in 2017. Recent U.S. numbers suggest it would pay between $83 million and $94 million for the bulk of the aircraft it receives between 2017 and 2023. Some put the estimates higher, and judging by the program’s history, the Harper government must assume this is a possible scenario. It’s even being suggested within DND that Canada might delay signing contracts in the hopes of hitting a better purchasing time.

No matter what, though, it means Canada could very well get fewer than 65 F-35s for its $9 billion. Operationally, it needs 65 planes. So what now?

The opposition is calling for a new, fully open and tendered competition.

Writing in the Ottawa Citizen on Friday, Alan Williams, former deputy minister for materiel at National Defence, argued that if the F-35 is the best plane for the best price, it will win that competition. Theoretically this is true. However, Auditor General Michael Ferguson noted after the release of his report that it would be a challenge to hold a fair competition in Canada given the vested interest in the F-35.

The F-35s could yet dog MacKay and the Conservative government into the next campaign. Worse, the political problem is also a matter of national security. Canada’s international stature would suffer without a dependable and deployable fighter jet fleet.

So what will MacKay do? Here is one idea:

In its 2012 budget, the Conservative government noted plans to adjust the National Defence funding profile to ensure available funding for major capital equipment procurements. It announced its intention to move $3.54 billion over seven years into the future period in which purchases will be made.

The language is vague. “Adjusted” funding could well be applied to shipbuilding as anything else, but it perhaps suggests the government was expecting to spend more than $9 billion on its F-35s, and this was a way to slide a few billion more down the pipeline in anticipation. If so, it would be difficult now politically (and perhaps reasonably) to add money to a frozen sum.

Assuming that money is available, the government could use that $3.54 billion to hold a separate, open and fair competition for another, different fighter jet. The second plane could act as an interim buffer to tide Canada over between the decommissioning of the CF-18s and the delivery of the F-35s.

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Boeing Co. McDonnell Douglas F-18

Against the other international alternatives, the winner of that competition would likely be the F-18 Super Hornet – a plane suitable to Canada’s needs in the Arctic (it’s a twin engine, for one). The Air Force is already equipped to handle the F-18, and with its contract from Boeing, Canada could theoretically obtain a traditional industrial regional benefits package – another thing the F-35 program lacks.

In its projections for the 2012-13 fiscal year, the U.S. Department of Defence expects to pay around $80 million for each of the 26 Super Hornets it plans to buy. Assuming a higher price for Canadian-ized versions, if simply used for procurement, $3.54 billion could buy Canada between 30 and 40 F-18s. Even then, Canada could purchase fewer and shore up some of that money for follow-on costs.

Buying and operating a second plane would diversify Canada’s fleet, allowing maneuverability for its future operations. At the same time, the F-35 procurement – under much better scrutiny – would carry on. And if Canada buys fewer F-35s, so be it.